Grenke AG

Welcome, and good morning, ladies and gentlemen, to our Q1 earnings call 2026. My name is Franziska Randt.

I'm Head of the IR Department, and I have the pleasure that today here with me is our CFO, Dr. Martin Paal.

Martin, welcome.

Good morning.

We will start with the presentation by our CFO, and then right afterwards, we will enter into our Q&A session. With that, I would like to hand over the call right away to Martin.

Please go ahead.

Yes. Thank you, Franziska, and also a warm welcome from my side for the first quarter results of 2026.

I would like to start with the highlights of the past quarter. The first 3 months of 2026 were characterized by an unchanged challenging macroeconomic environment and geopolitical tensions.

This resulted in a still elevated insolvencies in many European countries as well as generally some reluctance to invest among SMEs. This environment made it all the more important for us to manage our business strategically with a focus on profitability, risk management and sustainable growth.

Today, I can say we are delivering. Firstly, our strict measures for cost discipline are positively affecting our cost/income ratio, while operating income continues to grow.

Secondly, we achieved a good increase in leasing new business in the first quarter and grew at a solid CM2 margin despite the current market environment. And thirdly, we proactively strengthened our liquidity position in the first quarter.

We achieved this with a successful placement of another bond of EUR 500 million at the beginning of this year. The new collaboration with the German state-owned development bank, KfW, with a volume of EUR 200 million further supports our position and underlines the high relevance of our services for SMEs.

In the currently volatile market environment, these measures were more than just business as usual. In fact, the volume and timing of the raised liquidity were important as they provide us with sufficient headroom for continuous new business growth, especially in times of heightened uncertainty.

Overall, my message to you is clear. With group earnings of EUR 15.5 million, we are on track, and we are taking the necessary measures to steer grenke towards its targets.

If you have watched our full year presentation in March, you will be familiar with this slide already. We run grenke by utilizing the 3 value levers, operating income, operating cost, and risk to generate sustainable value growth and return on equity.

Our goal is to reach 10% return on equity by 2030. In other words, we have to increase our ROE by around 1 percentage point per year until 2030.

Our first strategic lever, operating income is strongly influenced by our leasing new business, which forms the foundation for our future profitability. In the first quarter of 2026, we achieved an overall increase in leasing new business by 4.2% to EUR 786 million, taking us to a total volume of leased assets of EUR 11.7 billion.

Our growth was driven by a strong performance in our 3 biggest core markets, Germany, France and Italy. Correspondingly, new business in our DACH region, which includes Germany, rose by 11% to EUR 186 million, while Western Europe and Southern Europe grew by 4.7% to EUR 210 million and 6.1% to EUR 202 million, respectively.

In our North and Eastern region, we saw a decline in new business by 9% to EUR 132 million. This resulted from the end of subsidies for eBikes in Finland in the second half of 2025, a greater emphasis on local overall profitability in these markets as well as general higher reluctancy in investment behavior among our customers.

Our other regions, however, which include our future core markets like the U.S., Canada and Australia, continued on their strong growth with 10% -- 10.8% to EUR 56 million, increasingly contributing to our leasing new business. Against the backdrop of the market conditions, our performance can be considered very solid.

And more importantly, we have proven that we are capable of managing our new business in a highly targeted and situational manner, not solely based on volume at any cost, but above all on quality. And quality or in other words, profitability is measured with our CM2 margin.

At 16.1% in the first quarter, our CM2 margin reflects both the current interest rate environment as well as the continued increase in risk provisions since the calculated risk costs are already factored into our CM2. In the previous first quarter of 2025, we had still profited from tailwind from decreasing interest rates, while risk provision had not yet reached the current levels.

What is most decisive here for us is the trend over time. Compared to the second half of 2025, our margin remained stable and increased compared to the fourth quarter of 2025.

This is an important indicator that our measures for risk adequate pricing and for the proactive management of our portfolio are having an effect. Coming from our new business, I would like to shed some more light on one of our key achievements in the first quarter.

In the first 3 months of 2026, we achieved a significant improvement of our operating result by more than -- by nearly 21% to EUR 81 million. Our cost/income ratio improved in the same time from roughly 57% to 53%.

Using the strategic levers, operating income and operating cost, we implemented measures to increase our operational efficiency. While our operating income increased by 10.2% to EUR 171 million, driven by our growing net interest income of EUR 107 million as well as our strong profit from new and service business of EUR 64 million, our cost discipline measures showed effect.

With an increase by only 2.2% to EUR 90 million, mainly attributable to slightly higher staff costs of EUR 54 million, our cost base grew by only a fraction of our income base. So throughout 2026, we will continue on this path, gearing grenke towards a higher profitability and our long-term goal of 10% return on equity.

This slide illustrates the quarterly development of our operating income before losses as well as the settlement of claims and risk provisioning over the last 2 years. As you can see, our loss rate has remained above its historical average since the first quarter of '25 and stood at 1.9% in Q1 2026.

Our settlement of claims and risk provision amounted to EUR 57 million in the same quarter. But -- and that is even more important, the substantial growth in our operating income base to EUR 81 million has largely offset the elevated losses observed since their initial rise in the third quarter of 2024.

Against this backdrop, it is essential to strike the right balance between profitable new business growth management and our ability to capitalize on attractive market opportunities. Ultimately, writing new business is not about avoiding risk altogether, but about assessing it appropriately and pricing it correctly.

We have no influence on the current level of insolvencies and on the contracts that have defaulted within our portfolio. Therefore, our focus is on intensifying our debt collection efforts for the existing portfolio and more importantly, taking the learnings from those defaulted contracts and refining our scoring and ECL assumptions regularly and going forward.

Our overarching goal remains clear to sustainably increase our return on equity to 10% by 2030. We already made tangible progress towards this target in the first quarter, with group earnings amounting to EUR 15.5 million compared to EUR 10.2 million in the previous first quarter, our return on equity after taxes, however, annualized, reached 4.4%, over 1 percentage point more than 1 year ago.

As you know, return on equity can fluctuate from quarter-to-quarter since it is an annualized figure. What truly matters, therefore, is the trajectory of profitability over time.

And against this background, we have continued to move in the right direction. This progress has been primarily driven by a steady improvement in our cost/income ratio.

We achieved this through disciplined cost management while generating solid revenue growth. And as a result, we are confident that our return on equity will continue to improve over the course of the year.

In short, we are firmly on track. A tactically important and business critical aspect of our financial is our liquidity and refinancing position.

With the successful placement of another EUR 500 million benchmark bond at the beginning of the year, we deliberately strengthened our liquidity position at an early stage, as mentioned earlier. Worth mentioning is also the favorable coupon of 3.875%.

Our senior unsecured pillar in total now stands at EUR 3.4 billion, accounting for 46% of our refinancing mix. Our deposit business stood at EUR 2.4 billion, representing 32% of our funding mix.

And additionally, we secured a EUR 200 million global loan from KfW in Germany in January '26. This strengthened our asset-backed pillar, which reached EUR 1.1 billion.

And our fourth pillar, external bank funding stands at nearly EUR 600 million, supported by a new EUR 150 million revolving credit facility with Intesa Sanpaolo signed in January 2026. So in a volatile market environment, our liquidity management goes beyond purely operational considerations.

Our funding mix provides a solid refinancing base to support our future leasing new business growth ambitions. Ladies and gentlemen, we remain committed to our annual targets of EUR 74 million to EUR 86 million in group earnings and leasing new business of EUR 3.4 billion to EUR 3.6 billion.

We remain committed to these targets despite the continuing adverse conditions and the persistently high level of uncertainty. Above all, because we have demonstrated our ability to stay on course even in such a challenging environment.

Our confidence to deliver on our target is grounded in 3 clear strategic priorities that continue to guide our actions. First, we continue to grow, but in a disciplined manner with a clear and firm focus on profitability.

Second, we are strengthening our earnings power even in a challenging market environment. Third, we are expanding our strategic flexibility for the future, both by further strengthening our refinancing base and by continuing the operational and technological development of our business model.

Thank you for your attention. I'm looking forward to your questions.

Thank you very much, Martin. Now we will enter into our Q&A session.

[Operator Instructions]. So we have the first question coming from Marius Fuhrberg from Berenberg.

I have 3 of them, if I may, regarding different topics. The first one, with regards to new business, do you expect the drag in new business in Northern Eastern Europe to persist through the remainder of the year?

And should we expect the delta comparable to Q1 in the following quarters? Second, with regards to risk costs, which markets are you most concerned about right now?

And where are you seeing first signs of improvement? And also, can you give us a sense of the quarterly trajectory you expect?

So do you anticipate a meaningful step down already in Q2? Or is the improvement more H2 weighted?

And lastly, with regards to CM2, we saw a slight recovery against Q4, but what gives you the confidence to reach the guidance -- guided 16.5%. And in your view, what are the key drivers for this development?

Good morning, Mr. Fuhrberg, happy to take -- to answer your questions.

Let me start right away with the new business development. We do not expect to remain this slower growth in Northern and Eastern Europe or this decline compared to the last year because we have seen this effect of especially in Finland with the cancellation of subsidies for eBike business that came in, in the second half of last year.

So this is currently in Q1 and Q2 base effect, so to speak, but we are expecting an increase in volumes in the Northern and Eastern countries over the remainder of the year, especially in the second half of this year. Regarding the risk development, I can say that risk costs are driving more or less our P&L, the risk provisions in basically all countries.

There are no countries where it is especially good or especially bad, I would say. So this is really a situation where we are confronted with in more or less every country.

And it is not foreseeable currently in the short term that we will see an instantaneous positive development in risk provisions. That's why we have already in our guidance, forecasted a loss rate of 1.6% to 1.7%.

That is more or less the level that we reached last year from a P&L perspective as well. The loss rate of 1.9% currently is also driven by a pure mathematical view, I would say, because we have the numerator, which is the Q1 risk provisioning that is then just multiplied by 4 for the whole year, and it is compared to the leased volume only of Q1.

But as we are growing in new business, the leased volume, which currently stands at EUR 11.7 billion will increase to above EUR 12 billion towards the end of the year. So this will only from a technical perspective, bring down our loss rate from our expectations right now.

And regarding the CM2 margin, yes, we have seen pretty good, if not too good CM2s in the first quarter, especially of last year because we have -- we have had, at that time, still decreasing interest rates and our conditions were not yet priced in to our customers because we have always this somehow delay in conditioning, passing on increasing or even decreasing interest rates. So the CM2 margins of above 17% at the beginning of last year are not comparable to a normal environment of CM2s.

Also in our current CM2 of over 16.1%, there's already priced in the higher level of risk we have seen, and that makes us confident that we will reach also our target of 16.5% in CM2 towards the rest of the year.

So we have the next question coming from Roland Pfäender from ODDO.

Could you provide us maybe an update on your cost management? Did you push forward more measures?

The cost income ratio looks quite good in the first quarter. The question is here also, is it sustainable going towards the upcoming quarters?

Or do we have some positive one-offs in the quarter influencing it? I'm looking here at the profit from service business.

I think there's also this Intesa interest rate in there, but is this a normalized number? Or -- are there any, as I said, one-offs in which should we need to consider?

Then second question, cost of risk. Could you maybe also explain what you see in your Stage 1 and 2 and 3 provisioning pillars, how the movements are there?

The question is, do you see just the beginning of a wave of insolvencies? Or is it rather going sideways?

Or what is your view there? And maybe a last question, CM2 margin.

I think market consensus is short-term interest rates will go up in Europe. Do you see some pressure for the CM2 margin in the next quarter if this happens?

Yes. Let me start with your last question.

We do not currently see any pressure from that end on increasing interest rates because we always have a, so to speak, daily view on our interest rates, how they would affect our CM2 margins. As I said, it's more from an operational point of view, how fast can we put that -- pass that on into our customers' condition rates.

But currently, we do not see a pressure on CM2s, honestly. Then your question on cost management and maybe one-off effects resulting from the Intesa deal with the assumption of the Rent ForYou portfolio.

I mean, with roughly 60% of our total cost base, staff costs are the most important driver of our cost base. And here, we are implementing and have implemented already strict measures that is, for example, really thinking about whether to replace employees if they are leaving us, for example.

It's also about driving forward our digitalization in terms of bringing our applications into cloud technology that makes business faster, that makes processes easier for our people. So it's really the idea to here take on the staff cost at the end, to have strict cost discipline here, and that is the main driver of our good cost/income ratio in the first quarter.

We expect the cost/income ratio to remain around 55% regarding our guidance we published. So now one quarter is over, we are satisfied with that.

As I said, the cost/income ratio will be in that range where we are up to 55%. That is our expectation right now.

When it comes to the influence or the impact of Rent ForYou, yes, last year, in the first quarter, there was not yet Rent ForYou portfolio on our balance sheet, and this drives, to some extent, also the service business, that is right. On the other hand, also from an interest expense perspective, we have also assumed the refinancing part of this Rent ForYou portfolio.

So from an interest expense point of view, there are also some low number, low single-digit number of millions in our interest expense. This weighs a little bit or compensates a little bit this one-off effect in service business, but it is already part of our income side and also on the cost/income ratio.

So as I said, expectation for cost/income ratio between where we are and 55% as guided. And the third one was on provisioning, on the stage movements and so on.

Honestly, the wave that we are now seeing of insolvencies is not new. It has already started, I would say, 1.5 years ago towards the second half, third quarter of 2024.

And we are seeing this elevated level of insolvencies since then. So there has nothing changed, not to the worst, so to speak.

So our view on insolvencies has not worsened, but it has not yet enhanced. And as I said, our loss rate looking forward of 1.6%, 1.7%, which we assume for the full year of 2026 already takes that into account that we are seeing at least in this year, in the short term, this heightened level of insolvency still.

Maybe a follow-up from the chat because it's -- you've been mentioning the consolidation effects of Rent ForYou for the first quarter. You mentioned that it is shown in the interest expenses.

Now the question is net interest income, is it impacted by the consolidation also on the operating income. So where are the effects shown?

Yes, that is a little bit tricky. The Rent ForYou portfolio is recognized as operate lease portfolio.

The operate lease income side is reflected as part of our service business. So the interest, however -- interest expense, however, is shown in -- yes, interest expense, but there is no interest income on the other hand, coming in from the rent portfolio.

So the effects are in interest expense in the service business and also below operating income, below operating result at the end, also some part in the risk provisioning as well. And we are talking about roughly EUR 3 million to EUR 4 million in the service business.

We are talking about EUR 1 million to EUR 2 million in interest expense and more or less the same number also in risk provisioning from the Rent ForYou portfolio.

We have another question in the audio queue from Tobias Lukesch from Kepler Cheuvreux.

Two questions on my side, please. First, on capital.

Could you remind us, please, of the MDA buffer where it currently stands in terms of basis points and how you do see that development and how it basically -- or what kind of comfort you have also in discussions with the regulator? And secondly, again, on the loss rate, you mentioned this kind of technical effect and the fact that the denominator will increase, obviously, with a bigger leasing portfolio.

However, in my view, this gives you maybe still a 1.8% plus loss rate, even so if the denominator grows. So I was wondering what brings you to the assumption that you keep that 1.6% to 1.7% and therefore, also the guidance?

Thank you for your questions. Let me start with your question on the capital side.

We are, as I mentioned in various calls, very confident that we will not -- or will have enough buffer above everything that is required from the regulatory side as well as our rating agencies for the next 2 to 3 years, not requiring any additional equity. Currently, we have buffers in terms of total capital ratio, which are above 200 basis points.

In terms of CET1 ratio, the buffers are even higher. We are talking about more than 300, maybe also 400 basis points buffer currently that makes us, as I said, very confident that we do not need any capital increase.

This has not been a critical point with regulatory bodies or with our rating agencies. We just recently had our annual talks with the rating agencies Fitch and Standard & Poor's.

There was nothing critical on that. And also, what has to be considered is that in this -- in last year, we had some one-off effects from the consolidation of the Rent Foryou portfolio of the Intesa goodwill at the end, which weighed on our capital ratios, also other transactions that we closed, the buy of the B2F company in Italy as well.

These were all one-off effects weighing, bringing down our total capital ratio, and we do not foresee such one-offs for this year. That's why we are so confident with our capital ratios.

Regarding the loss rate, to some extent, this is a mathematical question, as you mentioned, because our lease volume will increase towards the end of the year. However, also in the first quarter, we assume that the risk provisioning is a little bit higher as compared to the other quarters.

This was also the case last year. The effects or the reason for that is, for example, in the first quarter, the installments for the service business for the insurance like part of our contracts have to be paid.

They are then accrued over the year, but they have to be paid in the first instance for the full year. And that could lead to some customers that are defaulting, especially in the first quarter more than in the following quarters, weighing to some extent on our Q1 risk provisioning.

And taking both reasons together, we are confident to land at the end at our loss rate of 1.6% to 1.7%.

To add a follow-up question here on the risk side from the chat. The question is on how many basis points the cost of risk were embedded in our contribution margin to now in this quarter, maybe higher than last year's quarter.

Yes. The ECL component of our CM2 or the ECA component is part of our CM2, so already deducted.

At the beginning of last year, we were talking about 6.2% to 6.3%. It has elevated a little bit by 30 to 40 basis points where we currently stand, something above 6.5%, and that is the level that corresponds also to our assumption of the loss rate between 1.6% and 1.7%.

Thank you very much. We have another question coming from the audio line from Marius Fuhrberg again.

Yes. One follow-up question, if I may, a little bit different topic maybe.

With the current speed of AI development, what is your current view on those tools? And have you started any larger initiatives in this field?

And do you expect any significant operating efficiency gains over the next few years from this?

Yes. AI is a very important topic also for us, and you can imagine that we have started initiatives on that.

Something that is, I would say, quite normal with which many companies are working is, for example, in the daily business that we're using AI for internal chatbots, for example, supporting our people by writing e-mails or summarizing calls or meetings, something like that, that saves time at the end. Another very -- also from our point of view, very important and very -- already very successful use case is that we use this in the debt collection process.

So we have installed AI agents, for example, in some pilot countries where we call up our customers no longer by real people, so to speak, but by AI agents. And the customers we are approaching know that they are talking to an AI and the AI then friendly reminds them that there are installments still open and that we would be happy that they pay and so on.

And this also is a very, very promising initiative we are currently implementing on the AI side. As I said, we have 1 or 2 pilot countries, and we are continuously rolling that out to other countries, for example.

And that, again, is one example for the efficiency gains that we expect from especially staff cost perspective.

Speaking of the future, we're talking about the ROE target for 2030 and the question on how this target is defined. So maybe walk us through about the numerator, denominator on that.

So which equity is taken? Is it deducted -- deducting minority interest and interest expenses on hybrid bonds?

Yes. This is straightforward.

Our ROE target is defined as it is presented in our current quarterly statement or also in our financial statements at year-end. So this is the net income, our earnings after tax from a group perspective, they are still included the minorities, and there is included also any payments on AT1.

Also on the equity side, this is then divided by the average volume of equity, just taking year-end plus beginning of year divided by 2 as average equity on our balance sheet and then these figures are divided. So just to give you an example, last year, we had an ROE of 5.2% after tax, and this is just coming from the EUR 72 million after-tax earnings divided by the average volume of equity in total we have on our balance sheet from an IFRS perspective.

We have a next question from the audio line from Dr. Philipp Hässler from DZ Bank.

I have only one question left on the net interest income, which went up by 7% in Q1. Maybe you can also give some guidance for the next quarters, how you see the development?

Will this positive trend continue? Or is there maybe any headwind or anything which we don't see yet in Q1?

Yes, there was, especially in Q1, I would say, a base effect. I just mentioned it because in the interest expense, we have seen the effect of the Rent ForYou portfolio of EUR 1 billion to EUR 2 billion.

If you take this out of the net interest income increase, that would be higher, nearly double digit, not yet double digit, but towards double digit. And that's more or less what we are expecting for the full year growth in NII from 2025 to 2026.

[Operator Instructions]. Maybe wait a few seconds.

I see that this is not the case. Ladies and gentlemen, thank you for joining us today regarding our Q1 2026 results.

It was a pleasure having you, and thank you for your questions. We will attend several conferences and road shows over the course of the next month.

So I kindly invite you also to check out our corporate calendar on where to meet us, and we would be delighted to meet you there. Our next quarterly statement will be for the second quarter on August 13 this year.

And this concludes our today's conference. Take care, and goodbye.

Thank you very much. Bye-bye.